Texas Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet:

The change in Accounts Payable is reported as a negative cash flow in the adjustments to net income.

Question

Texas Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet:
  
The change in Accounts Payable is reported as a negative cash flow in the adjustments to net income.

Quizplus · Accepted Answer

If the Accounts Payable have decreased during the period, it means that the company has paid off some of its existing payables, which is a cash outflow, hence it is reported as a negative cash flow adjustment.